Hexcel battens down hatches to ride out virus storm
Hexcel Corporation, the US composite materials manufacturer with major operations in Duxford, is strengthening its cash position to offset a significant sales hit triggered by the coronavirus crisis.
Sales in the second quarter of 2020 were down 38 per cent to $378.7 million compared to $609.9m in the second quarter of 2019 as the company’s commercial aerospace clients took the full force of the COVID-19 business backlash.
Hexcel’s Duxford site was founded in 1934 by Cambridge University don, Dr Norman De Bruyne, a pioneer in structural adhesives and composite materials. Today the Duxford plant has six manufacturing buildings and is also Hexcel’s European Center for Research and Technology.
The facility manufactures an extensive range of prepregs – epoxy, phenolic or BMI resin systems – that are reinforced with carbon, glass or aramid fibres. Duxford also manufactures hotmelt prepreg resin films, a range of adhesives and honeycomb.
Key applications for products made at Hexcel’s Duxford site are commercial aerospace primary and secondary structures, helicopters, defence aircraft and aero-engines.
Chairman, CEO and President Nick Stanage said: “The aerospace industry has been hit by an unprecedented economic headwind as a result of the COVID-19 pandemic.
“We reacted quickly in response to the initial downturn in March to begin restructuring our business and align our costs to the changing demand for our products and continued those actions throughout the second quarter.
“We are working closely with our customers to understand and align with their changing demand requirements, as well as the adjustments being made throughout our supply chains.”
Stanage said OEM build rates had been reduced substantially, coupled with a significant and rapid move to reduce inventory across the OEM supply chain, particularly for carbon fibre. This near-term significant reduction in demand for our products and the margin mix impact of lower carbon fibre sales led to the drop in Hexcel’s operating margin and ultimately the reported quarterly adjusted EPS of $0.08.
Stanage added: “We had a strong balance sheet when the pandemic began. We have taken actions to drive positive free cash flow generation during the second quarter resulting in a sequential increase in liquidity of $53 million, further strengthening the balance sheet.
“Our actions give us confidence that we will continue to generate additional cash in the second half of 2020, a significant portion of which we expect will come from strong management of working capital, driven by a reduction in inventory.
“We are positioning Hexcel’s cost structure to generate strong margin performance when our markets stabilise and sales growth returns. Hexcel is a world leader in advanced composite materials and we continue to invest in new technologies to position us for next generation programs.”